Steering Manufacturing produces snow shovels. The selling price per snow shovel is $31.00. There is no beginning inventory.

PART 1

Costs involved in production are:

Direct material $4.00

Direct labor $ 4.00

Variable manufacturing overhead $3.00

Total variable manufacturing costs per unit $11.00

Fixed manufacturing overhead per year $180,200

In addition, the company has fixed selling and administrative costs of $162,600 per year.

During the year, Steering produces 53,000 snow shovels and sells 48,270 snow shovels.

What is the value of ending inventory using full costing?

$68,112

PART 2

Fixed Manufacturing Overhead $180,200

Divided by units produced 53,000

Fixed Manufacturing Overhead per unit $3.40

Direct Material per unit 4.00

Direct Labor per unit 4.00

Variable Manufacturing Overhead per unit 3.00

Cost per unit $14.40

Shovels produced 53,000

Shovels sold (48,270)

Shovels in ending inventory 4,730

Cost per unit $14.40

Value of ending inventory $68,112

What is the value of ending inventory using variable costing?

$52,030

PART 3

Calculate the difference in full costing net income and variable costing net income without preparing either income statement.

(Shovels Produced - Shovels Sold) x Fixed Manufacturing Overhead per unit

(53,000 - 48,270) x $3.40 = $16,082

or

Full cost $68,112

Variable cost $52,030

Difference $16,082

PART 4

What is the cost of goods sold using full costing?